MARKET ACITIVITY/TRADING NOTES FOR DAY ENDING WED., APRIL 22, 1998 (4)
TOP STORIES, Con't
US Economy to Receive $50 Billion Windfall If Oil Prices Stay Low
"Oil Is Unbelievably Cheap:" John S. Herold Study
If the price of crude oil remains at its current low levels, the US economy could benefit to the tune of $50 billion in savings on petroleum purchases, according to an analysis released today by John S. Herold, Inc.
''Given the present level of motor fuel consumption in the United States, a one cent per gallon decline in prices translates to $1.2 billion in annual cost savings,'' says Art Smith, chairman and CEO of Herold. ''Today's depressed prices for all oil products -- down about 20-cents per gallon thus far this year -- suggest that American energy consumers could save almost $190 per person on oil product purchases in 1998.''
''Oil is unbelievably cheap,'' Smith wrote in the April issue of ''Industry Insights,'' a regular series of analyses received by Herold clients. ''We recommend that savings minded energy consumers fill up every (safe, well-ventilated) tank they have to take advantage of the situation. Without a doubt, gasoline is one of the least expensive commodities on the American family's shopping list.'' To keep energy costs in perspective, the low cost of gasoline is particularly obvious when it is compared to some other consumer items on a container for container basis using the 42-gallon oil barrel as the standard container. Some representative price comparisons include:
Per Barrel Equivalent Prices;Crude oil $15.25, Gasoline $45.36, Coca Cola $78.38, Milk $126.00, Evian water $189.80, Orange juice $251.16, Budweiser beer $342.72, Jack Daniels $4,133.26, Remy Martin $7,844.51and Visine $238,133.21.
(1) Oil price WTI Spot on New York Mercantile Exchange; gasoline prices from the American Automobile Association; other prices based on comparison shopping at Stamford, Connecticut supermarket.
The bargain that gasoline represents is further demonstrated in Herold's study by the cost per-mile-traveled US motorists are currently paying. ''Motorists will pay about a nickel per mile for gasoline this year. That's a record low. It costs two to five times that much to finance and insure a car,'' Smith noted. ''Every U.S. family that has ever planned a cross-country driving vacation should take notice. You can travel coast to coast, excluding side trips and unexpected detours, for only $150 in gasoline costs.''
According to Herold's ''unscientific comparison pricing'' surveys since 1989, the only product that has declined as much in price as oil and gasoline is Coca Cola. The price increases include Visine (118%), orange juice (115%), Remy Martin cognac (94%), Jack Daniels (92%), Budweiser beer (53%),Milk( 26%), Evian water (20%), Gasoline (14%), Crude oil(-22%) and Coca Cola (-29%).
Herold notes that the largest potential savings to U.S. oil consumers will come from gasoline ($23 billion) and diesel fuel/heating oil ($13 billion). Americans consume about 8.2 million barrels of motor fuel per day, accounting for about 44% of the total petroleum products used in this country. Prices for other products, such as diesel fuel, heating oil, kerojet, residual oil and LPG, are as much as 20% per gallon lower so far this year, which helps to account for the expected substantial savings.
''This is not a new phenomena,'' Smith points out. ''When crude oil was selling at peak prices of about $40 per barrel in 1989, Coca Cola was $110.54 per barrel. Fuel was a bargain by comparison even then.''
IN THE NEWS
Suncor Energy has moved one step closer to realizing its oil sands expansion plans with the submission of its application to proceed with Project Millennium to the Alberta Energy and Utilities Board (AEUB) and Alberta Environmental Protection (AEP). The $2.2 billion expansion is designed to boost Suncor's oil sands production to 210,000 barrels per day by 2002, while bringing cash costs down to $10 to $11 per barrel.
''Expanding our oil sands business is a critical part of Suncor's growth agenda,'' says Rick George, Suncor's president and chief executive officer, who announced the regulatory filing at the company's annual meeting today. ''Filing the application to regulators is a milestone in moving Project Millennium off the drawing board and closer to the construction phase. And with the recent regulatory approval for the Wild Rose Pipeline project, we'll soon have the pipeline capacity to move our increasing volumes and to access new markets.''
The application is a 3,000-page document outlining the construction, operation and reclamation plans for Project Millennium. The project includes the expansion of Suncor's Steepbank Mine on the east side of the Athabasca River, additional mining equipment, twinning of the extraction plant and the upgrader, and expansion of the facilities that provide the operation with water, steam and electricity. Suncor will build on its 30-years of oil sands experience, while taking advantage of new technology and environmental improvements.
The application also presents a comprehensive environmental impact assessment, which analyzes the project's potential impact on air and water quality, human health, the land, vegetation and wildlife. A socio-economic impact assessment and a cumulative effects assessment of all announced projects in the region are also included. The application was developed in consultation with a wide range of stakeholders and attempts to fully address all issues identified in each of these areas. A summary of the application will be posted on Suncor's website (www.suncor.com).
Mike Ashar, executive vice president of Suncor Energy Inc. Oil Sands, emphasizes that the filing of the application does not mean Suncor's plans are inflexible.
''We will continue to work with community residents to ensure economic gain for the region occurs in a socially and environmentally responsible manner,'' says Ashar. ''Suncor's commitment with Project Millennium is to continuously maintain and build upon the stakeholder relationships andenvironmental improvements that were achieved as part of the Steepbank Mine and fixed plant expansion projects.''
The next step in the process is a review of the application with all stakeholders to ensure it is complete. Engineering work must be finalized before the project goes before Suncor's Board of Directors for approval. Approval from the Board and from AEP and the AEUB is required before construction, currently scheduled for April 1999, can begin. Suncor plans to commission the project between September 2001 and January 2002.
TriGas Explorations (TGX/TSE) updated their 1998 Operations and the following highlights were presented.
1. Construction of a new 16 kilometre pipeline from the Company's Irricana/Lone Pine properties to the Crossfield gas plant has just been completed and is expected to start-up in April 1998.
2. TriGas successfully fraced and completed a 100% interest Basal Quartz gas well at Irricana in Q1 1998. The well is scheduled to commence production during Q2 1998.
3. A second 100% interest Basal Quartz gas well was drilled and cased to a depth of 2,050 metres at Irricana in Q1 1998. The company plans to frac and complete this well in Q2 1998.
4. TriGas (50% interest) finished drilling its first horizontal well at Lone Pine in early April 1998. The primary target is the Crossfield gas zone at a vertical depth of 2,500 metres. The horizontal leg in this well opened over 800 metres of potential Crossfield gas reservoir. The well was successfully completed and is expected to be tied-in within the next two months.
5. TriGas (50% interest) is currently drilling the first of two horizontal legs into the Crossfield gas zone in a well directly offsetting the first horizontal well at Lone Pine.
6. At Irricaiia, TriGas (50% interest) commenced drilling a horizontal well in April 1998 to evaluate a Crossfield gas prospect offsetting the two successful horizontal wells drilled at Irricaria by TriGas in mid 1997.
Dalton Resources Ltd. (DAL/ASE) reported that the Strachan 3-22-38-9W5M well has reached a final total depth of 4340m in the Cambrian formation. Upon review of the open hole logs, Dalton in conjunction with its working interest partners will determine an appropriate course of action. The working interest owners have implemented tight hole status and therefore no further information concerning the well will be released to the public without prior approval from partners.
As previously reported March 27, 1998 the 3-22-38-9W5M well was cased to an intermediate depth of 3,420 metres and had encountered potential hydrocarbons in various formations down to the 3400m level.
Dalton is participating in the Strachan well for 15% of the well costs.
INTERNATIONAL
Companies
CityVIew Energy updates Hippo Well #1. MMC Exploration & Production (Philippines) Pte Ltd has been advised that ARCO Philippines Inc ("ARCO"), the operator of Hippo Well No. 1 has given notification that efforts to wireline log the well to total depth have been unsuccessful. Equipment for drill-pipe conveyed logging is not available and so no further effort to log the well will be attempted. Although ARCO has been unable for mechanical reasons to carry out tests, ARCO considers the well to be encouraging. Further work on the Hippo prospect and GSEC 74 will be submitted by ARCO within the next 60 days.
INTERNATIONAL
Countries
Venezuela Becomes First Exporter Of Crude For Brazil
Venezuela surpassed Argentina to become the first exporter of crude oil for Brazil, said the Brazilian PetroleumCompany (Petrobas) Wednesday.
In the first quarter of this year, Venezuela exported to Brazil 140,000 barrels per day as against 107,000 barrels exported by Argentina, it said.
Brazil produces about 900,000 bpd, but its domestic consumption is up to 1.8 million barrels daily.
Russia Jan-Feb Crude Exports Rise On Year to Year Basis
Interfax gave the following data for Russian energy exports, as provided by the committees: Russian Jan-Feb 1998 Non-cis Energy Exports Versus Jan-Feb 1997 (million tonnes)
Crude oil 18.14 from 16.95, Oil products 6.44 8.22, Natural gas (bcm) 21.80 23.05 and Coal 2.45 2.58
Ecuador's Petroleum Production Falls Short of Target
QUITO (April 22) XINHUA - Ecuador's petroleum production fell short of the government target in the first quarter of the year due to a financial crisis in the state company, Petroecuador.
Production stood at 34.5 million barrels of crude oil, behind the goal of 37.9 million, said to Luis Roman Lazo, president of the board of directors of Petroecuador.
He said fewer drilling derricks were contracted during the period while a tight budget made it difficult to provide adequate maintenance to the existing facilities.
SERVICE SECTOR
NQL Drilling Tools Inc. (NQL/TSE) announceD that a lawsuit has been filed in the Federal Court of Canada against NQL and its subsidiaries Black Max Downhole Tool Ltd. and Canadian Downhole Drill Systems Inc. for patent infringement. The lawsuit seeks damages in the sum of $25 million and an injunction restraining NQL from any future infringement.
Management has reviewed the claims and is confident that the claims are without merit. Legal counsel has been retained and a defence will be filed within the time provided for in the Rules ofCourt.
PIPELINES
TransCanada PipeLines Limited and Nicor, two partners in the proposed Viking Voyageur natural gas pipeline, today confirmed their commitment to serve markets in the U.S. upper midwest and stated they are pursuing options to provide gas transportation to the region.
''The partnership is evaluating options surrounding the Voyageur concept of bringing natural gas to markets in Wisconsin and northern Illinois, as well as other parts of the midwest,'' said Wayne Lunt, president of TransCanada's North American Pipeline Investments.
Ed Werneke, vice president of Nicor, said the partnership would be meeting with key stakeholders over the next several weeks to explore these options. ''Voyageur is proceeding well in the regulatory process and has gained wide support in the marketplace,'' he said. ''The partners are committed to pursuing options that will meet the growing needs of the midwest market as we enter the next century.''
Wisconsin energy companies, such as Madison Gas & Electric, Wisconsin Fuel & Light, Wisconsin Gas, Wisconsin Electric, Wisconsin Power & Light, and Wisconsin Public Service Corporation, have been supportive of the Voyageur project. ''We have received tremendous support from energy companies in Wisconsin, in particular, as well as from regulators and regional and local business leaders,'' said Mr. Werneke. ''We do not want to let them down.''
Nicor is a holding company based in Naperville, Illinois. Its principal businesses include Nicor Gas, one of the nation's largest gas distribution companies, and Tropical Shipping, a containerized shipping business that operates between Florida and the Caribbean. Nicor also owns several energy related subsidiaries.
MISC. NEWS FOR KERM'S LISTED COMPANIES
Pan East Petroleum Corp. announced that its board of directors has implemented a shareholder rights protection plan (the "Plan"). The Plan is effective immediately and will be submitted for shareholders' approval and ratification at the special and annual meeting of shareholders of the Corporation scheduled for June 5, 1998.
The Plan has been adopted in order to provide Pan East's board of directors and shareholders with sufficient time to assess and evaluate any take over bid and, in the event a bid is made, to provide the board of directors with an appropriate period of time to explore and develop alternatives which maximize shareholder value. The Plan is also intended to ensure that all of Pan East's shareholders are treated equally if a takeover bid is made. The Plan is not intended to deter take over bids and Pan East is not aware of any pending or threatened take-over bid.
Carmanah Resources Ltd. (CKM/TSE) announced that the final prospectus for its previously announced issue of 3,333,334 common shares from treasury at a price of $7.50 per share was filed with regulatory authorities on April 20th, 1998.
Simultaneously Carmanah announces it received notice from the underwriters of their intention to exercise an Over-Allotment Option to acquire a further 666,666 additional shares, also at a price of $7.50 per share, pursuant to the terms of The Underwriting Agreement.
Accordingly, Carmanah will issue a total of 4,000,000 common shares from treasury at closing, scheduled for April 30th, 1998. Gross proceeds will total $30 million, and after deducting commissions payable and the costs of the issue, net proceeds will be used to repay indebtedness and for working capital to fund accelerated and expanded development programs at Camar and Langsa in Indonesia. At closing Carmanah will have 40.5 million common shares outstanding.
EARNINGS
Suncor Energy / Watchlist
Message 4170241
Westminster Resources Ltd. / Watchlist
Message 4171703
Compton Petroleum Corporation / Spec 20 Listed
Message 4170678
OTATCO Inc.
Message 4170618
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